The armed conflict between Ukraine and its larger neighbor Russia continues to rage on. Russia has caused severe damage to infrastructure across swathes of Ukraine as it seeks to build a land bridge through Donbas into Crimea–the enclave that it holds since 2014. The Ukrainians have tried their best to defend their country’s borders- but the cost has been massive.
The price for the failure of diplomacy is not only being paid by Ukraine (with civilian deaths and refugees seeking shelter across Europe and beyond) and Russia (with most businesses and the national economy hit by American and European sanctions). The wider world–Asia, Africa, and the Middle East–are all seeing the ripple effects of this war in Europe. Food price inflation is affecting us all.
Both Ukraine and Russia realize that access to the Black Sea ports is essential if food (particularly wheat, corn, and sunflower seed) exports are to continue. These ports have traditionally served grain importers in the Middle East and Africa. The war has disrupted land side operations (harvesting, rail movement etc.) in Ukraine and the stockpiles of wheat and corn at the Black Sea ports are now effectively in Russian control. There is a danger of ships laden with grain and oilseed hitting sea-mines which have been laid for warships of either navy.
Drought is affecting many countries in Africa and the sharp increase in food prices (see Table A) is only going to cause increased hunger and death. A humanitarian crisis will soon be upon us. A ‘food corridor’ to provide safe outlets for both Ukrainian and Russian grain exporters out of the Black Sea is the need of the hour. This needs to be negotiated urgently. The world’s grain traders, flour mills and food processors are looking forward to this. Maritime shipping needs a breather to be able to better supply the world’s food needs.
The need for the Food Corridor trumps the need for the Land Bridge.
|May 2021||May 2022|
|Food Price Index||128.1||157.4|
|Cereal price Index||133.7||173.4|
|Veg Oils Price Index||174.9||229.3|
(Data Source: FAO)
Subramaniam Ramanathan, Executive Vice President, Avalon Global Research
As a seasoned business research and consulting professional, R.Subramaniam has worked for over 30 years in the space of global and Indian market research, management consulting, and business strategy across automotive, chemicals and petrochemicals, infrastructure, and financial services in multiple geographies. As the Executive Vice President at Avalon Global Research, he plays a leadership role in the business research team, responsible for developing high quality, bespoke research and trackers for corporates, management consultants, and the financial community in India and abroad.
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